Could a recent US criminal court case involving trading digital assets assist Coinbase in its defense against the SEC? Last week, Avraham Eisenberg was found guilty in a groundbreaking case of manipulating Mango Markets to unlawfully withdraw $110 million in digital asset commodities fraud.

On October 11, 2022, Eisenberg manipulated futures contracts, leading to a 1,300% surge in just 20 minutes, enabling him to borrow $110 million against inflated assets. The federal jury in New York convicted him of commodities fraud, commodities manipulation, and wire fraud.

Described as an "applied game theorist," Eisenberg used a false identity to boost the value of MNGO tokens and their futures contracts. His defense argued his actions were legal under the decentralized finance platform's rules, which caution users to trade at their own risk.

Could this help Coinbase in its battle with the SEC?

Eisenberg's conviction for commodities fraud, rather than securities fraud, might aid Coinbase's defense against the SEC's lawsuit. It underscores the lack of clear regulatory guidance from the SEC on digital asset classification, allowing Coinbase to argue the regulator has left the industry to navigate a murky regulatory landscape alone.

Moreover, Eisenberg's prosecution under commodities laws suggests some digital assets, like MNGO tokens, may fall under the Commodity Futures Trading Commission's jurisdiction, not the SEC's. Coinbase could use this to challenge the SEC's broad authority over crypto and tokens listed in its complaint.

By comparing MNGO's treatment with tokens in the SEC's complaint, Coinbase may argue for consistent regulatory treatment. It could also highlight the SEC's inconsistency in handling digital assets.

Additionally, Coinbase could urge the SEC to engage in transparent rulemaking to provide clarity on how securities laws apply to digital assets.

Navigating unclear US digital asset legislation

While Eisenberg's case offers potential for Coinbase's defense, each case's unique facts must be considered. The court will evaluate arguments and allegations based on tokens and legal frameworks.

Although the SEC charged Eisenberg for violating securities laws, there's been no update on the case. While Eisenberg's actions fall under the CFTC's purview, the SEC has claimed tokens similar to MNGO.

Eisenberg's case may not set a clear precedent, but it highlights regulatory inconsistencies. This could aid Coinbase's defense, showcasing the complexities of US crypto regulation.

Ultimately, Eisenberg's commodities fraud verdict adds complexity to the debate over digital asset regulation and may strengthen Coinbase's legal position against the SEC.